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Wiley Shows How It’s Done

March 12, 2009

A business leader should manage their business well and be honest. Sounds simple enough, but we see both parts violated regularly. In the current recession, we’ve seen both violated so many times that it’s been easy to lose faith and think the entire country is sinking beneath incompetent liars.

Not so!

The third-quarter earnings call of publisher John Wiley & Sons was one of the best I’ve heard recently. As background, know that Wiley’s global operations are organized into three core businesses: Professional/Trade; Scientific, Technical, Medical, and Scholarly (STMS), also known as Wiley-Blackwell; and Higher Education.

The following excerpt is from CEO William J. Pesce’s opening remarks:

I’d like to take a few moments to provide some context and perspective. While economic conditions have worsened considerably, our current guidance for EPS is the same. We’ve only lowered our revenue guidance a bit due to market conditions that are affecting our professional trade business. At the beginning of the year we thought all of our businesses would grow in the mid single digits.

Despite the turmoil in markets around the world… we still believe Wiley’s earnings growth in fiscal year 2009 will be among the best in the publishing industry on a performance basis.

We manage our business in a manner which I hope you’ve become accustomed. That is, we’re making difficult trade-off decisions regarding expenses and investments. All staff changes are discussed with members of Wiley’s leadership team. Travel has been curtailed driven by a continuous improvement mindset. We are constantly striving to perform our responsibilities more efficiently and effectively.

As we approach the end of one fiscal year and the beginning of another, we are painfully aware of the effect the economy is having on our professional trade business. We know our colleagues in STMS must navigate through some choppy waters as a result of tightening library budgets. We realize students and professors are focused on the price, value, and effectiveness of teaching and learning materials. And of course, we know that our stock price has decreased significantly.

As I stated many times, I don’t manage our stock price but I’m responsible for leading Wiley’s business through these challenging times. Leading a business today is not for the weak kneed or the faint hearted. I suspect many of you would say the same thing about investing. As a leader and a stockholder I’d like to share my reasons for being confident in Wiley’s future.

Our collection of businesses — STMS, professional trade, and higher education — is unique in our industry. Each of these businesses is connected by a common mission to promote knowledge and understanding and, goodness knows, we certainly need more of that in this troubled world. A wonderful example of the way in which our colleagues collaborate to deliver value to customers while creating competitive advantage is the recent publication in record time of a professional trade book, Restoring Financial Stability.

An executive summary of this book was also published in a Wiley Blackwell journal, Financial Markets, Institutions & Instruments. Both publications were completed in association with the faculty at NYU’s Stern School of Business and our higher education sales force will almost certainly secure adoption of this book for finance and economics courses. No other company in our industry could have done that.

While we are managing expenses and cash very carefully we are investing millions of dollars in our future…. We will not compromise our future to elevate short term pain or to realize short term gain. We’ve introduced more new business models in the past few years than in any other period in our company’s history, which spans two centuries.

We are providing more access to more content by more people than ever before. We are doing it in varied ways in print and online, and we’ve only just begun. Are we concerned about the effect of the economy on calendar year 2010 journal renewals and STMS? Of course we are. But, we have a vast reservoir of must-have content published in highly regarded peer reviewed journals. Our global team has built respectful professional relationships with individual librarians and consortia around the world.

Bolstered by the Blackwell acquisition, Wiley is well positioned to get our fair share of that business no matter how tight the budgets. If colleges and universities really want to improve teaching and learning, if they really want to deliver more for less, our colleagues in higher education have many options for professors and students.

While we are being barraged by negative news about the economy and differing opinions about where and when to invest, the Wiley investment proposition remains the same. We publish quality content that makes a difference in the lives of human beings around the world. A substantial portion of our revenue is recurring and a growing percentage is delivered electronically.

We have an impressive collection of global brands that are highly regarded by the constituencies that we serve. Our revenue is derived from global markets, 51% from the States, 21% from Europe, 13% from Asia and 12% from the rest of the world. Our cash flow will continue to be healthy, providing the financial resources to reduce debt, pay dividends, and invest in our future. Last but certainly not least, our performance-based culture built on a rock solid foundation of ethics and integrity is the primary source of sustainable competitive advantage.

We recently conducted a survey of some current and prospective investors. I’d like to share a few quotes from that survey.

One investor said, “I admire their honesty and transparency. They answer questions head on.” Another investor said, “We came away with the feeling that everything they did was well thought out, and that continues to this day. I mean, look at their track record when it comes to execution.” Another said, “They preserve capital well. They exercise fiscal discipline, their acquisitions have been tremendous. Investors are never worried about empire building or paying too much for a company — which most of their peers have done.” And my favorite, “Wiley is a paradise from an investor’s perspective.”

Honesty, transparency, execution, fiscal discipline; I cannot predict the future with certainty but I can state with conviction that those words will continue to describe the way in which we conduct our business.

I wish all companies were run by people like that. Governments, too, for that matter.

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